Become a Creator today!Start creating today - Share your story with the world!
Start for free
00:00:00
00:00:01
Treasury Beyond Borders - Risk Redrawn: Exploring New Fault Lines
646 Plays15 days ago
Contemporary treasurers face rising FX volatility, interest rate uncertainty, and geopolitical disruptions. How can they adapt?
Join HSBC's Rahul Badhwar, Global Head of Corporate Sales and Volkan Benihasim, Global Head of FX, EM Rates and Commodities as they talk about building resilience, improving forecasting, and leveraging AI. Our panel also explore liquidity shifts, supply chain realignment, and strategies for managing risk in an unpredictable world.
Recommended
Transcript
Introduction to HSBC Global Viewpoint Series
00:00:01
Speaker
Welcome to HSBC Global Viewpoint, the podcast series that brings together business leaders and industry experts to explore the latest global insights, trends, and opportunities.
00:00:13
Speaker
Make sure you're subscribed to stay up to date with new episodes. Thanks for listening, and now onto today's show.
Special Series on Global Treasury Evolution
00:00:23
Speaker
Welcome to this special TMI podcast series in collaboration with HSBC called Treasury Beyond Borders, Balancing Risk and Opportunity Through Global Growth. I'm Eleanor Hill, Editorial Consultant at TMI, and over the course of seven podcasts and articles, I'll be exploring how global treasury is evolving amid geopolitical shifts and digital transformation.
00:00:45
Speaker
Across these episodes and with insights from HSBC experts, we'll dive into key themes both globally and across different regions, from managing risk in uncertain markets to leveraging new trade corridors and emerging technologies.
Exploring New Fault Lines in Risk
00:01:00
Speaker
But for today's episode on Risk Redrawn, exploring new fault lines, I'm delighted to be joined by Rahul Badoir, who is Global Head of Corporate Sales, Markets and Security Services at HSBC, and Vulcan Beni Hashim, who is Global Head of FX, Emerging Market Rates and Commodities, Markets and Security Services HSBC.
00:01:21
Speaker
So welcome both of you. It's so good to have you here. I know we've got absolutely loads to talk about because there's so much going on in the world at the moment. But Rahul, maybe you can set the scene for us to kick off.
00:01:33
Speaker
What would you say is keeping treasurers up at night right now? We're dealing with so much geopolitical uncertainty, market volatility, shifting global trade patterns, you name it, it's happening.
00:01:45
Speaker
So where do you see the biggest risks and also the biggest opportunities at the moment? No, firstly, thank you for having both of us. Now, as you've outlined, I think it is a very challenging time.
00:01:56
Speaker
And I think for a lot of our corporate clients, the big question is really understanding all the factors that you mentioned and understanding how they impact them, right? So how is it impacting their customers, their supply chains? is it going to change the cost of doing business?
00:02:12
Speaker
Is it going to impact their cost of leverage? Is it going to impact their operating margins? So, you know, it's just multi-point in terms of what it can do. If I go to the first question, which is you the biggest risks, and let's say we take a glass half empty view, then I guess in some ways we would say, okay, what if we actually went into a global recession?
Global Recession and Stagflation Risks
00:02:32
Speaker
Now, again, not to scare everybody because a global recession is not the norm. I think since World War II, there have probably been just only four global recessions. But if we go back 35 years, the average rate cut cycle for the Federal Reserve lasts about 44 months.
00:02:52
Speaker
And we are currently just about eight months into the current rate cut cycle. So clearly, if history follows and and the future pans out, there's definitely a lot more to come, right, in in terms of the rate cut cycle.
00:03:05
Speaker
I think where things can get worse than even a recession is if we start going into what is being called stagflation scenario, which is a combination of high inflation and stagnant growth.
00:03:17
Speaker
And in many ways for our clients, this is worse than a recession because it impacts the ability of central banks to proactively cut rates to support economic growth.
00:03:29
Speaker
If I look at history and history being a guide to
Impact of Dollar Appreciation and Credit Spreads
00:03:32
Speaker
the future. Now, during a global recession, historically, the U.S. dollar has gone up. And there is a twofold impact if you think about it as far as our clients are concerned.
00:03:42
Speaker
Number one, all things remaining equal. For some of our U.S. headquartered companies, this definitely means there is a risk that they will see a drop in the value of the overseas earnings translated back into U.S. dollars.
00:03:57
Speaker
And for some of our corporates who are operating in some of the emerging markets and their balance sheet currency is emerging market currencies, these are likely to come under pressure. The flip side of the coin, which could act, you know, pressure on import content, if there is a high heavy import content for some of the companies, obviously will increase costs for them.
00:04:17
Speaker
Now, a recession is also likely, I think, if I look at move away away from the US dollar, what it can do in terms of financing, a recession is also likely to go hand in hand with a widening of corporate credit spread.
00:04:32
Speaker
We've already seen in the US both investment grade and high yield corporate credit spreads widen and actually are currently probably at the widest level since last September. And ah further widening is likely to make things more difficult, especially for highly leveraged corporates and high yield corporates.
00:04:52
Speaker
And in some ways, they are faced with a double whammy. And the double whammy is some of them have raised money during the pandemic when treasury yields were at historic lows and are much higher today.
00:05:04
Speaker
And on top of that, you're getting impacted by widening credit spreads. right So that's, I would say, the the glass half empty kind of view. Yeah, and you've given us a really great overview of all of the challenges and I know that will resonate with so many of the listeners and and that double whammy, certainly I'm thinking of a few that will definitely be ah resonating with that.
Supply Chain Realignment and Opportunities
00:05:25
Speaker
But tell us a little bit about the glass half full side of things.
00:05:29
Speaker
What are the opportunities out there that you see? So there is a silver lining, if I can call it that. There is a realignment of supply chains, as you referenced earlier on, which is going on. That is definitely benefiting markets such as Vietnam, Bangladesh, India.
00:05:43
Speaker
And we are seeing that, right? We have a sizable presence in all these markets. And this is bringing with it opportunities for many of our global corporates who are critical cogs in the supply chain wheel to expand their geographic presence and and support the demands of their customers.
00:06:02
Speaker
Now, there is also a sector angle. For example, we've seen Germany has recently announced investment spend on defense and infrastructure. Clearly, that will have a positive impact on those two industries and the domino effect that expenditure creates.
00:06:16
Speaker
But our clients, I think there is also AI, which is a very important opportunity in the sense that for a lot of our companies, one of the things that they're looking at when it comes into risk management is not um only improving productivity, but also improving and incorporating AI into enhancing the forecasting of their future cash flows.
00:06:38
Speaker
And the better they're able to do that, there is more certainty around their risk management and the hedge ratios. Now, from a financial markets perspective, and I'll probably end with that, I think very simplistically, two sets of opportunities.
00:06:51
Speaker
We have seen the yield curve steepen. We've had an inverted yield curve not too long back. The yield has now steepened. And this is allowing some companies to think about readjusting their fixed floating debt mix via swaps to better position themselves for a potential economic slowdown and a low rate environment.
00:07:10
Speaker
And secondly, the dollar is going to be more volatile. I'm going just in the past six months, the dollar went up 10% and it's now down 6%, right? So there is opportunity, I think, for our clients to consider flexibility.
00:07:23
Speaker
And this is where hedging using options, I think, becomes fairly sensible approach. And we are definitely seeing a pickup in FX option activity from our client base.
00:07:34
Speaker
And this is across the board. I wouldn't say this is peculiar to a particular sector or a particular market. It's just flexibility is the need of the hour. Absolutely that. And it makes complete sense when you think about it. To have that option, that flexibility, and there's just so much going on to...
00:07:49
Speaker
to cope with and to think about and just having that option to take some of the risk away is really gives you a little bit of peace of mind in such challenging times. But Rahul, thank you so much for that comprehensive overview of everything that's going on out there.
00:08:03
Speaker
Vulcan bring you in because off the back of what Rahul said, maybe you can give us a sense of what's happening with liquidity as a result. Is there a lack of liquidity in the market, for example.
00:08:13
Speaker
And Rahul also mentioned those shifting supply chains. Are you seeing clients being exposed to currencies which might not be as liquid as the ones that they're more used to? Tell us a little bit about what
Managing Liquidity Across Currencies
00:08:24
Speaker
you're seeing.
00:08:24
Speaker
Sure, Eleanor. Firstly, when we talk about liquidity, obviously we talk about the spectrum of currency starting from deep liquid markets, such as some developed markets, pound sterling, dollar-yen, or even some emerging markets like Bellarmix or China.
00:08:41
Speaker
going into less liquid emerging markets, and also going down frontier markets such as Egypt or Argentina where liquidity is really scarce. In each of these markets, ah the liquidity is most impacted by news around macroeconomic policy as well as regulatory changes.
00:08:59
Speaker
Otherwise, they follow the local market trading hours. And at HSBC, we offer clients a range of tools for specific liquidity management for more than 130 currencies.
00:09:11
Speaker
through our AI markets. Generally, more generally about liquid liquidity depends on also the market size and regulations and also how globally linked the economy in terms of trade and investments with the rest of the world, so as well as the local and the global macroeconomic environment.
00:09:26
Speaker
Just to give an example to that, in stress periods like the global financial crisis or the series of ah sharp rate acts by US s in 2022, they kept reminding us the high correlation between liquidity and the financial stability.
00:09:41
Speaker
When looking more generally at the current year thus far, in general, liquidity have been good. We have seen a lot of volatility in various spots in the markets, but we had no issues in executing client orders in size.
00:09:54
Speaker
It is also due to the fact that at HSBC, we internalize a very large portion of the flows that we hedge for our clients. On the part about supply chains regarding your question, our colleagues in Global Trade Solutions and are supporting many clients in reprofiling their supplement supply chain.
Currency Risks in New Geographies
00:10:11
Speaker
which some went lower cost locations and others prioritizing more local proximity to protect against deglobalization risks. However, new suppliers' base sometimes create new currency risks to deal with, and clients need to study these currencies in terms of regulation, liquidity, available instruments, tenors.
00:10:32
Speaker
An example, if a client is shifting some of their ah supply chain to Thailand, Indonesia, Malaysia, Vietnam, They now need to understand these economies, interest rate environments, micro drivers, new regulations.
00:10:46
Speaker
And this could be true irrespective of whether they ultimately pay their bills in dollars or local currency. A recent statistic from the Cooperative Management Survey ran by Rahul's team last year has evidenced roughly nine times as many treasurers expect to deal with a larger share of foreign currency cash flows in the next three years than those expecting to see less effects.
00:11:11
Speaker
So this certainly is a trend to be very much aware of. To help the clients get a grip of these new markets, our global network is a crucial asset for clients to understand the nuances both locally and also at the headquarters level.
00:11:26
Speaker
And also our global research team annually publishes an emerging market currency guide, which has become an essential companion for many treasurers to navigate these waters.
00:11:37
Speaker
Oh, fantastic stuff, Vulcan. Thank you for that. And good to to know about the EM Currency Guide. I'm sure some of the listeners will be yeah heading to have a look for that because there's so much to think about. And like you said, some of those ah geographies that you mentioned, Thailand, Indonesia, Malaysia, Vietnam, so many different things to think about. But Rahul, I wanted to come back to the corporate risk management survey that Vulcan mentioned there. So you recently published the third edition, I think it is.
00:12:03
Speaker
And there's so many insights in there. I think it's over 800 CFOs and senior professionals from across the world. So tell us your take on what stood out most from the findings.
00:12:13
Speaker
How should treasurers be adapting to what's going on, especially FX risk and also interest rate risk management? Give us your thoughts. Excellent. I think just before I dive into that, to the point Volkan made about internalizing flows, I think what is very important is that in in a lot of these emerging markets where the currencies are restricted in the sense they're not really traded as sterling or your euro might be,
00:12:38
Speaker
I think what really benefits our clients is that we are able to bring corporate flow on foreign exchange, institutional client flow and retail client flow together. Because in most of these markets, we have sizable business servicing all these three client segments.
00:12:52
Speaker
And I think that definitely does go a long way in helping us our clients navigate these markets and and and internalize the flow. yeah Just back to your question on the risk management survey. So yes, this is the third one.
00:13:02
Speaker
We do this once every three years. And this time around, the participation was fairly diverse. We had 530 corporates from various sectors and strong representation from all the regions, whether it was Asia, Europe, Middle East, Africa, and the Americas.
00:13:19
Speaker
A few data points. So no surprises, but over 70% of the participants have said that they have been impacted by high inflation and elevated volatility.
00:13:31
Speaker
And for some of the sectors where their performance of the sector is very closely linked to the state of the underlying economy, these clients tend to have more floating rate debt, right? Because their underlying business tends to underperform the economy is slowing down and therefore the benefit of rates also go lower.
00:13:50
Speaker
Some of these clients definitely did get impacted by the speed with which central banks raised interest rates starting yeah give or take, right? And And I think that is something that caught a lot of market participants off guard with the speed with which rates went up.
00:14:06
Speaker
Certainly, I think when it comes to managing risk, I think what is very clear from the survey is that it is need to understand the quantum of risk that a corporate is exposed to.
00:14:17
Speaker
And then evaluate how significant that risk is when it is impacting the PBT of a company. And if you look at the survey, 93% of companies have said that they took a financial impact from inaccurate cash flow forecasting, right? So if you're trying to protect something, your protection does get diluted if you're not being able to accurately forecast what you're looking to protect.
00:14:45
Speaker
The other thing I think is that over time, managing risk has definitely become more second nature to our clients. And partly this is because of volatility, but it is also partly because our clients are expanding globally, via supply chains, right? Reallocation of supply chains that we've said, or because they are in search of a new consumer base.
00:15:07
Speaker
So apart from opportunities for growth, there is also the cost angle when it comes to supply chain. And what is this is also doing is expanding the portfolio of currencies and potentially interest rate risk that they need to manage.
AI and Electronic Platforms in Risk Management
00:15:20
Speaker
Right. So obviously risk because of this, more time is being spent on understanding risk and managing risk.
00:15:26
Speaker
I think last but not least, I think there is ah search for e efficiency. So an increasing number of clients are moving towards using electronic platforms for execution. I think 65% of the clients we spoke to was about 55% a year ago, so about a 10% jump.
00:15:43
Speaker
Clearly are using electronic platforms for execution. And I would say geographically, the biggest increase we've seen the sentiment and mentality of electronic use of execution has been with our corporate client base in Asia.
00:15:58
Speaker
It doesn't surprise me. Asia is so often leapfrogs ahead with the technology side of things, but I know a lot of corporate clients in in Europe and elsewhere also just embracing that electronic side of things and looking at automation, looking at ai all of these new technologies and innovation that's coming through to help people manage these risks a little bit more efficiently and effectively.
00:16:21
Speaker
But Vulcan, it's clear from the survey that a lot of finance leaders are still saying that they're struggling to manage FX risk properly. You, HSBC, have been recognized as a top global FX bank for corporates. You've won multiple awards in this space and many other spaces, trade payments, transaction banking.
00:16:39
Speaker
So with that experience that you've got... What's your view on why FX risk is still so tough to manage? Because we've got, like we've said, these new technologies coming through.
00:16:50
Speaker
Is it all due to the macro environment, the market dynamics? Are they fundamentally changing? What kind of changes have you noticed in terms of the FX market and how corporate clients are adapting to this environment?
00:17:03
Speaker
Let me approach those challenges from if few angles, actually. Firstly, now understanding and predicting the fiscal policies and their impact on the monetary policy certainly is a challenge considering all the macro uncertainty we have been since the pandemic.
00:17:18
Speaker
This, coupled with a shift in the global trade flows, ultimately has an impact on the currency valuations. And we might, as a result, can see some currency pays breaking out of longer term trading ranges.
00:17:31
Speaker
A more recent example, we have seen yen, Japanese yen, rising its rates. But at the same time, it was ah breaking its weakest levels, which is a bit counterintuitive.
00:17:44
Speaker
yeah But that was a result of the, at the same time, rising rate differentials with dollars. The other aspect to take into account is also positioning. Positioning also matters and can lead to changes that may be difficult to understand from a macro data perspective only.
00:18:00
Speaker
Sometimes you may have an absolutely accurate view in terms of growth and inflation on the country, but because of the positioning angle, the currency may behave in a different manner.
00:18:12
Speaker
One thing also to note that the corporate treasurer's effects needs are somewhat different from other financial counterparties. Their main risk mandate is risk management and cost efficiency as such.
00:18:28
Speaker
It's little to no mandate to seek active gains, what we call alpha, in their currency transactions. So corporates understand they cannot time markets perfectly, hence they need to adjust their exposures from a risk management perspective.
00:18:43
Speaker
Finally, another way to adapt these changing parameters in terms of the uncertainties I outlined, to use more ah alternative tools that we are seeing more and more use and flexible ones, such as FX options as a tool for risk management as well.
00:19:00
Speaker
Yeah, absolutely. Which harks back to what Rahul was saying earlier, just having that flexibility there. And like you say, for the corporate treasure, it's all about managing that downside. It's not about looking for the upside.
00:19:11
Speaker
And with that in mind, AI is coming in. Rahul mentioned it earlier. You mentioned your AI markets portal. So there's so much going on with AI and people have really high hopes for it playing an increasing role in risk management. We saw from the survey, I think it was 61% of finance leaders thinking that it's going to enhance decision making.
00:19:32
Speaker
But where do you see AI having the greatest impact within corporate treasury teams, Vulcan? And and what are the risks and opportunities here to think about as well? We are seeing a huge potential for corporate treasury functions and to be fair, also internally as well, especially around helping to collate and analyze ever-growing ah data volumes more accurately and more efficiently.
00:19:57
Speaker
Talking about the survey, over 80% of the respondents identified this as an area where they're expecting AI to support them within the next five years. Outside of integrating AI into their own processes, as I mentioned, its treasurers are also expected to benefit from new technology in way banks provide them information.
00:20:19
Speaker
Our own HSBC AI Markets platform, as an award-winning platform, it offers services which is purpose-built, which nature, language, processing technology embedded.
00:20:32
Speaker
which doesn't only help them to analyze data, but also offers market insights and liquidity insights and various analytics, which also help with some of the challenges that we have mentioned earlier during our conversations.
00:20:46
Speaker
Having said that, I think it's also safe to note that we are still at early stages of understanding yeah lasting use cases and adapting AI efficiently. ah There are challenges around cybersecurity as well as energy consumption and alignment with sustainability ambitions that we need to be cognizant of.
00:21:05
Speaker
I know there's so many different areas to think about it. It is a bit of a Pandora's box once you get into it, but so many opportunities as well, particularly for around that efficiency angle and very interesting. And HSBC has some great research and papers all around AI. Actually, they did another TMI podcast recently. on AI in commercial payments with Manish, who is well worth a listen for anyone who's out there. So have a little look for that on the TMI website. But coming back to our conversation, because we've got so much still to cover, I wanted to dive into the interest rates a little bit more with you both.
Interest Rates and Risk Management Strategies
00:21:39
Speaker
Rahul, interest rates in particular in the US and Europe were on much higher levels than we were a couple of years ago, as we've spoken about. How it influenced the risk management of things like financial debt and interest rate risks more generally?
00:21:53
Speaker
And what can treasurers do differently to stay ahead because they've got so much to think about, so much to contend with? So give us some ideas from your side. And again, just before I get into that, one of the questions that you asked Volkan about ease of managing FX risk.
00:22:06
Speaker
I think if you think about it, by their very nature, our corporate clients think tend to think long term, right? ah They don't really think day to day. And when you're thinking long term, when you've got and dealing with something like the foreign exchange markets, which can be fairly short term in the way that they react, that's where the disconnect comes in. And you've got something that is creating noise.
00:22:27
Speaker
And unfortunately, because of the myriad of factors that impact foreign exchange, you can't predict everything, let alone anything. So views can change fairly dramatically. And then if you've made a long-term five-year decision ah based on something, you might just see that decision having to turn on its head.
00:22:43
Speaker
it's and It's not an easy job at all. On the rates question, I think you've put it really well. So if you put, let's set the stage. If you look back in time, the last time Fed funds was above 5%, it was actually 2007, 2008.
00:22:57
Speaker
two thousand and seven two thousand and eight Similar for when the Bank of England bank rate was above 5%, again, it was 2007, 2008. And even if you look at the ECB, the last time their refinance rate was above 4%, again, it was that period of 2007, 2008.
00:23:13
Speaker
So what that means is that for a really long period of time now, from 2012 to 2022 or 2009 to 2015, depending upon which central bank you're talking about, we've had a very long period of low interest rates.
00:23:28
Speaker
And what do I mean by low interest rates? ECD refinance rate being below 1%, pet funds being basically close to zero, and the Bank of England rates, again, for a very long period of time being below 1%.
00:23:41
Speaker
So you can get sucked into a little bit of a sense of complacency if you're living through 15 years nearly or 10 years nearly of of extremely low interest rates. So a few things here. I think one is we do have clients who, in spite of this low rate environment, are very comfortable running 100 percent fixed rate portfolio.
00:24:02
Speaker
because they have large capital expenditure needs. And what is absolutely critical for them is ensuring that they're being able to meet their financial covenants on interest cover and other financial ratios.
00:24:16
Speaker
Then we have certain clients whose underlying business is very highly correlated to the GDP of the market that they operate in. And for those who have a relatively large quantum of debt, having interest cost fall as an economic slowdown starts to hurt their operating income becomes very important.
00:24:36
Speaker
And they then definitely tend to wear more towards having floating rate portfolios to have that flexibility. The third point I would say is that the recent volatility that we've seen in treasury yields and treasury yields shot up in November last year, and we've now seen them come down quite a bit also, has also meant that our clients who are looking to issue but by raising debt in the capital markets are actively looking to pre-hedge.
00:25:00
Speaker
For example, this year, Every week, literally, we've seen U.S. 10-year Treasury yields jarrate by 20 basis points. Yeah. Right? And if you're issue a couple of billion dollars of debt, that 20 basis points can mean a lot in terms of dollar and cents in interest costs.
00:25:15
Speaker
But I think the biggest challenge for clients has been trying to ascertain where rates are headed. Like I said, there are so many factors that have influenced inflation and inflation expectations have meant that market expectations and rates have been as volatile as rates themselves. Right?
00:25:31
Speaker
And if you take, for example, just the start of this year, right, with literally going back just about three months, the market was probably pricing in just one interest rate cut by the Fed in 2025. Fast forward to a few weeks ago with the talk of recession gaining momentum, the market started pricing in nearly 85 basis points of cuts, right? So yeah from one going to little over three.
00:25:54
Speaker
And this is very similar to even the foreign exchange market, and which is why the use of optionality, retained flexibility in the hedging program is becoming very important for our clients.
00:26:05
Speaker
And the changes in the steepness of the yield curve has also allowed some clients to extend the duration of the hedges without any extra cost. And I think this is what we saw when the yield curve was actually inverted until a few months back.
00:26:19
Speaker
And last but not least, I think what has also been optionistic for our clients is what we call the cross-currency basis, where our clients are able to synthetically achieve the desired funding mix in a particular currency by taking advantage of that synthetic financing and being able to generate funding at a much lower cost than directly borrowing and in the bank market. So that's probably where I'll end on the rates front.
00:26:43
Speaker
Fantastic stuff, Rahul. Thank you for that. And again, that flexibility ah coming across is key for many people. But Vulcan, let's get your thoughts on this, particularly with the US interest rate
USD Interest Rates' Impact on Global Trade
00:26:53
Speaker
expectations.
00:26:53
Speaker
Obviously, they played a key role in the valuation of global currencies last year. They continue to be a focus in 2025. There's an awful lot going on. So how does that impact how corporates are managing their longer term exposures?
00:27:07
Speaker
Certainly, it's a very relevant question as USD is still the ah most frequently used currency to settle global trade. A large change in USD interest rates or more specifically, as I gave the example of the Japanese yen, the a specific change in the rate differential between USD and their trading partner countries.
00:27:26
Speaker
It's going to both impact the pricing of the standard corporate hedge instruments, say FX forwards, which nearly 90% of the survey participants regularly use, as well as the e economic prospects, especially of emerging markets, which rely on the investments into their economies.
00:27:44
Speaker
With Asian markets representing the highest underlying revenue growth for many international corporates over the past decade, the respective debt to finance growth on these investments has mostly been sourced from intercompany balances in currencies like dollars or euros or to local bank loans.
00:28:04
Speaker
Therefore, the change in interest rate, the financials has made it most ah more cost effective now to use de derivative instruments like cross-currency swaps to transform a portion of that debt to their local currencies, in this example, their Asian currencies.
00:28:20
Speaker
This also helps to ah align the assets, earnings, and debt profile of the companies while lowering the cost of the debt. Not surprisingly, have seen those transactions most frequently for USD entities, given the more favorable market dynamics.
00:28:38
Speaker
For example, an interest rate saving or funding in CMY compared to USD at a five-year tenor would be roughly as much as 2%, and that is 100 basis points.
00:28:50
Speaker
Yeah, it makes a huge difference for sure. Okay, guys, we've covered so much in this episode. So I wanted to wrap up just with maybe a quick takeaway for our listeners.
00:29:01
Speaker
If you had to give our treasurers, our audience out there, one suggestion for future-proofing their risk strategy going forward, I know that's a bit of a tough ask, but what would it be and why? What should our treasurers be doing now to stay ahead of the curve?
Adaptable Risk Strategies for Businesses
00:29:16
Speaker
So, Eleanor, in some ways, good news or bad news, depending on how you look at it, i don't think there is a perfect risk strategy. Yeah. And what I mean by that is it all depends on what each individual company wants to achieve.
00:29:28
Speaker
What are their KPIs, right? And that that means that what might work really well for one company may not for another. And that is because their sectors differ, their operating margins differ, their leverage differs, et cetera, et cetera. Yeah. Yeah.
00:29:42
Speaker
But the one thing I would say which applies to all companies is that you need to be adaptable. This means dynamically evaluating the market, evaluating your business goals and proactively amending your hedge portfolio to reflect what works best for the foreseeable future and for what you're trying to achieve from your risk management strategy.
00:30:02
Speaker
Great stuff, Rahul. Thank you. And yes, it is a little bit reassuring maybe to know that there's no perfect risk strategy, but still ah keep trying to tweak it as you go for sure. Vulcan, what would you say? What's your final suggestion for our listeners?
00:30:15
Speaker
I think Raul has put it really well. There is no crystal ball. So therefore, my suggestion would be to constantly for them to reassess their exposures. Good risk management is built on as accurate input data as possible.
00:30:28
Speaker
Be actively involved in the business strategy decisions as early as possible. to plan for any changes in market risks arising from those including how to assess the new FX markets for them, to ensure that they have an appropriate toolkit for the risk management, including embracing flexibility such as the FX options I mentioned as critical success factor to offset uncertainty.
00:30:53
Speaker
And finally, be curious about new tools and technologies to gain a more strategic lens. Oh, brilliant stuff. Wonderfully wrapped up there. I would say be actively involved, be flexible, embrace innovation. And like you said, be curious. That's our key
Conclusion and Future Topics
00:31:09
Speaker
takeaway. So, well, guys, thank you so much. That is a wrap for this, the first episode of our Treasury Beyond Borders series. I hope you've enjoyed the discussion and everyone listening.
00:31:19
Speaker
Be sure to subscribe and stay updated on our upcoming topics. podcast episodes. Watch out for the articles accompanying this series as well. And in the next episode, we'll be looking at the shifting dynamics in the Americas and how treasurers can navigate those changes. But for now, thanks again to our wonderful speakers and thank you to everyone for listening.
00:31:53
Speaker
Thank you for joining us at HSBC Global Viewpoint. We hope you enjoyed the discussion. Make sure you're subscribed to stay up to date with new episodes.